Raise Taxes on the Rich?

Spread the wealth. Close the income gap. The Robin Hood effect. Take from the rich to give to the poor. On the surface this seems most admirable, but I am not entirely convinced raising taxes on the rich will do the American people one iota of good. Let me explain.

Loopholes:
I work for a consulting firm that earns millions by exploiting the shortcomings of our tax system. There is no perfect system and anyone who has accumulated any amount of wealth has a team of tax professionals finding the “dreaded” tax loop holes for their clients. It’s not immoral either. It is the fiduciary duty of any corporation to do this – to maximize the value of the stakeholders investments. It would be ignorant to believe that any system can be devised in which this can be avoided.

Incentive:
Fact: The best way to eliminate poverty is via capitalism. We want to bring wealth and jobs to this country and keep it here – not drive it away. The only way to do that is to make it advantageous for businesses to do business in America. We do not want our wealthiest citizens to move their wealth off shore, to invest in countries like China and India, to keep foreign bank accounts, or to move their money and jobs away from the people who desire that capital and employment here. Increase taxation aimed at the rich in the name of the social good is counterproductive.

There is a hole in our bucket:
We are a nation in debt. Not because we do not have enough tax revenue, but because we spend too much. We have a variety of social programs and the largest military in the world. The truth is our tax rate is as high as any country in the world – even highly socialized countries (~ 2.5% GDP). An increased tax on the rich will not solve our debt problem, it won’t even slow it down. We have to reevaluate the way we run this country from top to bottom. You can try to fill a bucket as fast as you can with tax dollars, but when the bottom of your bucket is a hole you can never fill it.

The Government Does not Create Wealth:
The Government does not create wealth and it usually does a poor job of transferring it. I think of the Government like a pipe transferring warm water. The water starts out hot, but as it travels loses heat before it reaches its destination. Similarly, when compared to businesses, because of inefficiency and ineffectiveness, the Government loses wealth during the transfer from the top to the bottom. Sometime the deserving never even see the money and those willing to exploit the system abuse it. Businesses’ sole purpose is creating wealth through innovation and production, thus it is the most efficient method to create and spread wealth. Taxation hinders the creation of real wealth.

We Should do a better job managing what we have before asking for more:
If a bankrupt person request a personal loan would you concede? Would you give a horrible co-worker more responsibility if they had already filed multiple times? Would you promote a person not ready for additional responsibility? No.

Similarly why do we advocate giving a Government, already trillions in debt, more of our hard earned money. Our Government has proven time and time again our tax dollars are used to fund foreign wars and pay for services that do not benefit our citizens. When you ask for more of our tax dollars – however noble the gesture – I just can’t agree.